The final form of the long awaited new charge registration regulations for UK companies, the Companies Act 2006 (Amendment of Part 25) Regulations 2013 (the "2013 Regulations"), were released on 14 January and will come into force on 6 April 2013.
Most of the changes between the previous draft and the final form of the 2013 Regulations clarify the drafting, although there are a few changes of substance.
The main objectives of the new regime are to provide a single UK-wide registration regime that applies to all UK companies (so including Scottish companies) and to provide for electronic filing.
Under the 2013 Regulations:
- the charge registration regimes for English and Scottish companies will be merged so that there will be a single UK-wide regime
- two types of electronic filing will be introduced for registering charges - software filing (for "bulk" filing) and web filing; paper filing will also continue to be possible
- all charges created by a UK company must be registered unless specifically excluded eg rent deposit deeds and charges excluded from the registration requirements by other legislation, such as the Financial Collateral Arrangements (No 2) Regulations 2003. In practice this should make the decision whether to register much simpler than at present, but see the final point below regarding security created under foreign laws
- in order to register a charge, the filer will send a "section 859D statement of particulars" of the security, together with a certified copy of the charge instrument (not the original) to Companies House. Personal information (other than individuals' names), signatures and bank account numbers can be redacted from the certified copy
- the section 859D statement of particulars will include, among other things, whether the instrument contains a floating charge and whether it contains a negative pledge
- the registrar will allocate a unique reference code ("URC") to each registered charge which is intended to make searching and tracking of charges easier
- as is currently the case, persons who may register a charge will expressly include persons interested in the charge, so including a chargee
- chargees (being persons interested in a particular charge) will also be able to file release statements
- the 21 day time period for registration of a charge is retained
- (in contrast to the current position under the Companies Act 2006) there are no separate provisions addressing the process and time period allowed for registration of charges created outside the UK or over property in jurisdictions outside the UK, the registration period is 21 days as stated above (this would seem to be a logical consequence of the new ability to use web filing, rather than the post, and the requirement to file a certified copy of the charge under the 2013 Regulations, and not the original charge as is currently the case)
- the criminal consequences of failing to register a registrable charge are abolished; the consequence of invalidity against a liquidator, administrator and creditor of the company is retained
- there are provisions to determine the date of creation of a charge. These have been included largely to address differences under English and Scottish law as to when a charge is created and also addresses instruments held in escrow
- the chargor or the chargee may notify Companies House of an amendment to a previously registered charge where there has been an addition of a negative pledge or a variation in the ranking of the charge by filing the relevant form, together with a certified copy of the instrument effecting the amendment or variation (this filing is optional not mandatory)
- where a company acquires property subject to a charge, the company or a person interested in the charge may deliver a statement of particulars relating to that charge to the registrar, but there is no sanction of invalidity, nor any fine, if no such statement is delivered (this filing is optional not mandatory)
- the registrar's certificate of registration will be conclusive evidence that the relevant charge documents were delivered to the registrar within the statutory period allowed, but will no longer be conclusive evidence of the statement of particulars filed
- a chargor which holds charged property as a trustee can file a statement to this effect by filing the relevant form at Companies House (this filing is optional not mandatory)
- UK companies will no longer have to keep a register of charges themselves but they will be required to keep copies of charge instruments available for inspection (together with copies of any amendments to such instruments and, if any particulars referred to in the section 859D statement of particulars are not contained in the charge instrument itself, copies of the other documents referred to in or otherwise incorporated into the charge)
- the provisions relating to registration of enforcement of security have been clarified by setting out exactly what information must be provided to the registrar following the appointment of a receiver or manager (these provisions do not extend to receivers appointed under Scottish law)
- as is the case under the current legislation, there are provisions enabling a court application to be made to register a charge out of time and provisions enabling a court application to be made to rectify the register for omissions and mis-statements
- there are provisions relating to the alteration of Scottish floating charges (under s466 of the Companies Act 1985)
- there are provisions relating to the situation where no instrument of charge exists (ie oral charges) but as this will be very rare in practice, this is not covered in this briefing
- the previous draft contained a section called "Notice of matters disclosed on register", which attempted to fix persons taking a charge over a company's property with constructive notice of "any matter requiring registration and disclosed on the register at the time the charge is created". Thankfully this has been dropped from the 2013 Regulations (in our view, this was far too simplistic in its approach to a complex area of law, that concerning priorities)
- new regulations relating to limited liability partnerships ("LLPs") are awaited (these should follow the same format as those for UK companies, but with minor amendments as appropriate for LLPs).
2. Charge Forms
Another important change is that new charge registration and satisfaction forms will be introduced in April 2013 to reflect the 2013 Regulations. The new forms will have the prefix "MR", replacing the current "MG" forms that have been in use since 1 October 2009 for charges granted on or after that date. The numbers on the forms will also change and the form series will run from MR01 to MR10. For example, we understand that the replacement for current form MG02 (statement of satisfaction in full or part of a charge) will be form MR04, and the replacement for current form MG04 (statement that part or whole of the property charged has been released or no longer forms part of the company's property) will be form MR05.
The information required to complete one of the new charge registration forms should be much briefer than is currently the case, as much of the information is to be provided by way of "tick boxes" on the new forms. Searchers will instead be able to see the information in the certified copy document that must be filed as part of the new registration process. For example, in the new form MR01 (particulars of a charge), there are tick boxes to indicate if the charge instrument contains (i) a floating charge, (ii) a negative pledge and (iii) a fixed charge or fixed security over any tangible or intangible property (or Scottish law equivalents). The only detailed information required to be included in a form MR01 as regards charged assets are descriptions of any land (including buildings), ships, aircraft or intellectual property registered or required to be registered in the UK and which is subject to a fixed charge or fixed security.
However, the introduction of a new series of charge registration forms will make company search due diligence exercises more complex after 6 April 2013, with searchers needing to be familiar with the 1985 Act charge registration forms, the 2006 Act charge registration forms and the new charge registration forms applicable under the 2013 Regulations, and when each set of forms was in use.
3. Impact of foreign law
As stated above, all charges created by a UK company will be registrable in future, unless they are specifically excluded from the regime. The 2013 Regulations use the English legal term "charge" (which is stated to include a mortgage and certain Scottish law security) to describe security interests requiring registration. However, where a UK company creates a security interest under a foreign law, that foreign law may not use the term "charge" either in, or as a label to, the instrument which creates the security eg a foreign law pledge over shares. Therefore, in our view and as a general guide, if that foreign law instrument is, in substance and effect, sufficiently similar to the English law concept of a charge or mortgage, it should be registered at Companies House to prevent it being held void for lack of registration.
4. Transitional provisions
The 2013 Regulations come into force on 6 April 2013 and the provisions relating to the registration charges will apply to charges created on or after that date. Therefore if a charge is created on or after 6 April, it must be registered under the new regime created by the 2013 Regulations, using the new "MR" charge registration forms and sending a certified copy of the charge instrument to Companies House. However, if a charge is created on 5 April and sent to Companies House for registration one week later, it must be registered in accordance with the current provisions of the Companies Act 2006, using the existing "MG" registration forms and accompanied by the original of the charge instrument.
The provisions in the 2013 Regulations relating to (i) registration of enforcement of security, (ii) entries of satisfaction and release and (iii) notification of a negative pledge or variation in the ranking of a charge, will apply to all such notifications or registrations made on or after 6 April 2013, irrespective of whether the relevant charge was created before or after that date.